By Tiernan Ray

Shares of Intel (INTC) are down 46 cents, or 1.6%, at $28.01, after the company last night reportedQ1 results ahead of expectations, and a Q2 revenue view that topped estimates, but projected Q2 gross margin that fell below what analysts’ were expecting as the company ramps up production on new chips and spends marketing dollars to support its push for “ultrabook” computers.

Intel did say gross margin should bounce back for the full year. The company said at least one smartphone using its chip is set to be announced this week.

This morning, price targets and estimates are going up. Even Goldman Sach’s bearish James Covello raised his price target a buck to $23.

The bulls this morning emphasize that Q1 results were strong, especially in a market hit by disk-drive shortages, and that the company has things to look forward to, such as its “Ivy Bridge” processors and new ultrabooks coming to market.

The bears worry gross margin is headed definitively in the wrong direction, and they are not convinced Intel will find the kind of growth with ultrabooks that it is projecting.

Bullish!

Alex Gauna, JMP Securities: Reiterates a Market Outperform rating and a $33 price target. “We view this as a buying opportunity for the stock based on our view that the near-term headwinds of its server and mobile computing technology conversions will turn into strong top-line and gross margin tailwinds in 2H12 when these upgrade cycles ramp in earnest […] Investors should look beyond the near-term margin and cash flow issues to the longer term strategic benefits of Intel investing in 22nm and soon 14nm process technology leadership. We see these benefits intersecting nicely with the Windows 8 upgrade cycle on deck for 2H12, and becoming even more apparent in 2013 when the next-gen Haswell architecture comes to market in Ultrabooks and Tablets.”

Glen Yeung, Citigroup: Reiterates a Buy rating and raises his price target to $35 from $29, writing that the company’s “manufacturing advantage” is “coming into view.” “While this [the lackluster Q2 gross margin outlook] is putting short-term pressure on the shares, if one believes Intel’s full-year GM guidance, full-year EPS will rise given higher 1H revenues and 2H GM. Meanwhile, with the strong performance of server, Intel’s “high-single digit” 2012 revenue growth guidance appears more achievable, leaving room for further EPS upside. With Intel already trading at a P/E & P/B discount to other large-cap tech stocks (10.8x/3.1x vs. 12.5x/5.0x) and other chip stocks (12.4x/2.5x), there is no change to our overall stance: we continue to view the shares favorably for 2H12 momentum (Win8, ultrabook, Ivy Bridge), and we have increased conviction that Intel’s manufacturing strength positions them well in mobile and possibly foundry. ”

Daniel Berenbaum, MKM Partners: Reiterates a Buy rating and a $33 price target. “The stock could move sideways near-term despite reiteration of full-year guidance (which, all else being equal, should drive estimates higher),” he writes. “Valuation is less of a discount than it was six months ago, and there are legitimate concerns around long-term earnings growth, but our sense is that consensus still underestimates the data center cycle and the strength of INTC’s manufacturing advantage, particularly against ARM-based competitors.”

Jonathan Pitzer, Credit Suisse: Reiterates an Outperform rating and a $35 price target. “While 2Q GM guide will impact near term trading, we would note that GM will have been ABOVE 60% in 12 of 12 quarters from 2010-2012E; vs. just 13 of 44 quarters from 1990-2000 and 3 of 36 quarters from 2001-2009; perhaps the clearest example of a structurally improved business model. In addition, Data Center Group Romley ramp accelerating in C2Q (+14% q/q and 50% of growth). Stock still cheap (9.3x 2013 EPS ex-Cash vs. group avg. of 14.0x, 9.6% CY13 FCF Yield), still under-owned and still perhaps the best structurally positioned company in Semis.”

Bearish!

Hans Mosesmann, Raymond James: Reiterates a Market Perform rating. “With the shares up 14% year-to-date vs. the SOX up 8%, we see better opportunity in more cyclically exposed names […] While Intel remains bullish on end-market demand, both of its new processors (Ivy Bridge for consumer and Romley for servers), and the Ultrabook category of PCs, we believe the 2012 outlook for high-single-digit growth (while potentially more achievable) is still a tall order […] Regarding the Win8 launch we believe share losses in the lower-end computing segments (Ultrabook/ ultrathin) will not be offset by traction in smartphones/tablets.”

James Covello, Goldman Sachs: Reiterates a Sell rating while raising his price target to $23 from $22. The Q1 results were “solid,” nevertheless, “Out-year Street EPS estimates will likely be flat to down after the call and the gross margin is beginning to deteriorate. We have long argued that Intel’s stock is highly correlated with the gross margin, which we acknowledge exceeded our expectations this cycle. We attribute the strength primarily to the fact that Intel kept capex flat at about $5 bn from 2007-2010. However, this supply discipline has changed, in our view, with Intel spending $10.8 bn in 2011 capex and planning to invest $12.5 bn in 2012. We believe the roughly $400 mn qoq 2Q12 inventory build and below-Street 2Q12 gross margin guide.”

Christopher Danely, JP Morgan: Reiterates a Neutral rating on the shares while raising his price target a buck to $26. “We view Intel’s C12 guidance as aggressive as the company expects QoQ revenue growth in 2H12 to be above normal seasonality. We believe there is negative leverage in Intel’s model if the company doesn’t achieve its sales forecasts since spending and utilization rates are elevated.”

Craig Berger, FBR Capital: reiterates a Market Perform rating and raises his price target a buck to $30. He sees gross margin recovery in Q4, when yields are better, but he’d rather bet on Qualcomm (QCOM): “In total, revenue upside is largely offsetting gross margin downside, with Intel’s execution and product initiatives on track. Stepping back, Intel has sustainable advantages in manufacturing, its product roadmaps, process leadership, technology leadership (high-K, 3D transistors), and scale. However, tablets and smartphones are tempering growth in Intel’s core business, and with some WoA risks. Thus, we highlight QCOM as our preferred large- cap semiconductor pick, with more fundamental tailwinds in the shift to 3G and 4G smartphones.”

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There are 9 comments

APRIL 18, 2012 11:21 A.M.

KP wrote:

One more blunder by Goldman Sachs. They say Sell and raise target price. I wonder about naïve fund managers who listen to GS. Or is it that when GS says Sell, it means Buy and a Buy means Sell (they did with mortgage securities in 2008)

APRIL 18, 2012 11:24 A.M.

GSMuppet wrote:

Give any scare you can fabricate. I,m not selling my intel. We muppets are familiar with your manipulation of news.

APRIL 18, 2012 12:07 P.M.

Cube Monkey wrote:

Capex is growing - Is this bad or good? Considering that Intel is outpacing all of the other silicon foundries due to this consistent increase of Capex, it looks like a smart move to me. They are 1-2 generations ahead of anyone else. I don't understand how this is an issue with "bears" - Intel taking a stragic view towards the future for the long term - that sounds more of a "bull" argument to me.

APRIL 18, 2012 12:26 P.M.

Pedro wrote:

I'm an ex-Intel staffer and I used to deal with their Capital process... I would be deeply worried if they WEREN'T planning to spend $12Bn ramping their 22nm fabs.

APRIL 18, 2012 12:38 P.M.

Gaucho420 wrote:

Poor intel....someone always calls them a sell.

APRIL 18, 2012 12:50 P.M.

sam wrote:

This is a number game folks. The call ratio is high compared to put. So they want to keep the stock at 28 until friday of this week. After that slowly move the stock a buck or two

APRIL 18, 2012 1:28 P.M.

Anonymous wrote:

gross margin is beginning to deteriorate.
TAIWAN SEMICONDUCTOR MFG. CO. LTD. : TSMC To Increase 2012 Capex To Over US$7.29 Billion From US$6 ...
What is TSMC 28nm revenue?
Around $1.6 billionin 2012!
For more than 10 years Covello covered equipment stocks and I suppose Intel.
How stupid can an analyst be ?
He can't be that stupid can he

APRIL 18, 2012 1:28 P.M.

techy46 wrote:

Bears crap in the woods, bulls crap in the fields. Find something intresting to report.

APRIL 18, 2012 10:35 P.M.

stretcho44 wrote:

A sell rating on Intel by GS is AMAZING!!! GS has maintained the SELL rating for 2 years. If you search out the "Ratings by Goldman Sachs" to get a list of ratings, the Intel rating is one that is hard to understand unless there is some unspoken GS conflict of interest in Intel. GS and NOMURA are both way off base.

About Tech Trader Daily

Tech Trader Daily is a blog on technology investing written by Barron’s veteran Tiernan Ray. The blog provides news, analysis and original reporting on events important to investors in software, hardware, the Internet, telecommunications and related fields. Comments and tips can be sent to: techtraderdaily@barrons.com.